Commodities
Oil books 3rd weekly gain; market awaits Fed verdict on inflation
© Reuters.
Investing.com — Oil booked a third weekly gain, with U.S. crude trading above $90 per barrel the first time in 10 months on better-than-expected data from top importer China, as markets awaited the Federal Reserve’s verdict on inflation in the United States.
The Fed’s policy-makers aren’t expected to raise when they meet on Sept. 20, after 11 hikes that added 5.25 percentage points to a base rate of just 0.25% in March 2020. But what Chairman Jerome Powell says at his news conference on Wednesday will be closely watched for clues on Fed think for the rest of the year, especially with two more policy meetings on the schedule for November and December.
For context, the headline reading for the U.S. rose a second month in a row in August, reaching a year-on-year growth of 3.7% from 3.2% in July. High pump prices of gasoline accounted for more than half of the increase — a phenomenon that could put renewed pressure on inflation fighters at the Fed. The central bank’s desired inflation remains at a max 2% per year and it has vowed to get there with more rate hikes if necessary.
“The Fed are highly unlikely to hike next week but are also unlikely to take the last hike out of their dot plot for later in the year,” economist Adam Button said in a post on the ForexLive forum.
New York-traded West Texas Intermediate, or , crude settled at $90.77, up 61 cents, or 0.7%, on the day. The U.S. crude benchmark rose to $91.15 earlier in the session, its highest since November. For the week, WTI finished up 3.7%, adding to prior back-to-back weekly gains of 2.3% and 7.2%.
London-traded settled at $93.93, up 23 cents, or 0.3%. The global crude benchmark hit a 10-month high of $94.62 earlier. For the week, Brent was up 3.6%, adding to prior back-to-back weekly gains of 2.4% and 4.8%.
Crude prices have been on a tear since early June, with the rally accelerating in the past three weeks after major oil exporters Saudi Arabia and Russia colluded to remove a combined 1.3 million barrels from the market each day until the end of the year.
U.S. fuel demand/inflation picture murkier than thought
Notwithstanding the July-August rise in inflation, the surge in crude prices haven’t made their commensurate impact on U.S. fuel prices. Gasoline at pumps across America averaged at $3.866 per gallon this week, up just 5.8 cents from a week ago. Lower demand for fuel was the reason, especially after the Sept. 4 Labor Day holiday that marked the close of the peak summer driving period and the approach of the fall season, which begins Sept. 23.
“The slide in people fueling up is typical, with schools back in session, the days getting shorter, and the weather less pleasant,” said Andrew Gross spokesperson at the American Automobile Association, which publishes weekly fuel price data. ““Oil costs are putting upward pressure on pump prices, but the rise is tempered by much lower demand.”
The Fed, of course, is watching all these closely, including the global supply-demand picture for energy and how they could hit home.
China has two stories as well to oil demand, economic recovery
In China’s case as well, its oil demand and economic data tell different stories.
China’s industrial output grew 4.5% in August from a year earlier, versus a forecast 3.9%, and retail sales expanded by 4.6%, beating an expected 3% increase. Also, Chinese crude imports rose nearly 31% last month while refinery throughput hit a record 64.69 million metric tons as a function of summer travels.
But these short-term upswings only mask China’s structural challenges, from worsening demographics to slowing productivity growth and an economy overly saturated on its property market. If lucky, China’s Gross Domestic Product, or GDP, growth will exceed 5% this year versus the record expansion of 11.8% in 2020, say economists.
Essentially, what happens with the Chinese economy down the road is far more important than any energy, metals or grains rally of today. That’s simply because continuously underperforming Chinese GDP will come back to rear-end any commodities rally.
(Peter Nurse and Ambar Warrick contributed to this item)
By Laila Kearney and Georgina McCartney
LONDON (Reuters) -Oil prices slipped on Friday and were on track for a third consecutive weekly decline, pressured by muted demand in China and hopes of a Gaza ceasefire deal that could ease Middle East tensions and accompanying supply concerns.
futures for September dipped 56 cents to $81.81 a barrel by 1250 GMT. U.S. West Texas Intermediate crude for September fell 40 cents to $77.88.
For the week, Brent is trading down almost 1% while WTI is down more than 2%.
Recent data, such as July 20 figures showing that China’s total fuel oil imports dropped 11% in the first half of 2024, have raised concern about the wider demand outlook in China.
In the Middle East, hopes of a ceasefire in Gaza have been gaining momentum.
A ceasefire has been the subject of negotiations for months, but U.S. officials believe the parties are closer than ever to an agreement for a six-week ceasefire in exchange for the release by Hamas of female, sick, elderly and wounded hostages.
Oil price declines were capped, however, by threats to production from Canadian wildfires, a large stocks draw and continued hopes of a September cut to U.S. interest rates after strong economic data, said PVM oil analyst Tamas Varga.
Investing.com– Oil prices fell Friday, on course for a third consecutive losing week as concerns over sluggish demand conditions in Asia weighed.
At 09:00 ET (13:00 GMT), fell 0.9% to $81.62 a barrel, and dropped 0.8% to $77.66 a barrel.
Crude set for third straight week of losses
Both benchmarks are on course for another losing week, the third in succession, with down just under 1% and WTI nearly 3% lower.
Persistent concerns over slowing growth and demand in top importer China have been the dominant factor, part triggered by GDP data from last week, which showed the Chinese economy grew less than expected in the second quarter.
Additionally, more data this week showed the country’s apparent oil demand fell 8.1% to 13.66 million barrels per day in June.
Beijing unexpectedly cut a swathe of lending rates this week, further trying to loosen monetary policy amid growing concerns over sluggish growth.
Apart from China, uncertainty over Japan also grew following middling , while weak activity data in Europe also pointed to economic woes.
Gaza ceasefire in focus
Also weighing on the crude market have been increasing hopes of a ceasefire in Gaza.
The leaders of Australia, New Zealand and Canada called for an immediate ceasefire in a joint statement on Friday, while U.S. Vice President Kamala Harris has pressed Israeli Prime Minister Benjamin Netanyahu to help efforts at reaching a deal, striking a tougher tone than President Joe Biden.
A ceasefire has been talked about for months, but if it was to occur then some of the risk premium could be removed from the market.
Strong US GDP, rate cut hopes offer some support
On the flip side, data, released on Thursday, showed that the U.S. economy grew more than expected in the second quarter, despite pressure from high rates and relatively sticky inflation.
The reading drove up hopes that the world’s biggest fuel consumer was headed for a “soft landing,” where economic growth remained steady while inflation eased.
These hopes were also lifted by the data showing overall U.S. inflation cooled as expected in June.
According to data from the Bureau of Economic Analysis, the (PCE) price index slipped to 2.5% in June, from 2.6% the prior month. .
Stripping out volatile items like food and fuel, the year-on-year “core” gauge, widely known as the Fed’s preferred gauge of inflation, remained at 2.6%, only marginally above the Federal Reserve’s 2% target.
This sparked increased optimism over a potential interest rate cut by the Federal Reserve in September.
Data showing steady drawdowns in U.S. also offered some positive cues to oil markets, as fuel demand in the country remained robust amid the travel-heavy summer season.
(Ambar Warrick contributed to this article.)
(Reuters) -A wildfire reached the Canadian town of Jasper, Alberta on Wednesday, one of hundreds ravaging the western provinces of Alberta and British Columbia, as firefighters battled to save key facilities such as the Trans Mountain Pipeline, authorities said.
Wildfires burning uncontrolled across the region include 433 in British Columbia and 176 in Alberta, more than a dozen of them in the area of Fort McMurray, an oil sands hub.
The pipeline, which can carry 890,000 barrels per day (bpd) of oil from Edmonton to Vancouver, runs through a national park in the Canadian Rockies near the picturesque tourist town, from which about 25,000 people were forced to evacuate on Tuesday.
“Firefighters … are working to save as many structures as possible and protect critical infrastructure, including the wastewater treatment plant, communications facilities, the Trans Mountain Pipeline,” Parks Canada said in a post on Facebook (NASDAQ:).
The pipeline operator did not immediately respond to a Reuters request for comment, but said earlier it was safely operating the pipeline and had deployed sprinkler protection as a preventive measure.
In the day’s last update, Jasper National Park said it could not report on the extent of damage to specific locations or neighbourhoods, and that it would provide further updates on Thursday.
Canadian Prime Minister Justin Trudeau said his government approved Alberta’s request for federal assistance.
“We’re deploying Canadian Armed Forces resources, evacuations support, and more emergency wildfire resources to the province immediately – and we’re coordinating firefighting and airlift assistance. Alberta, we’re with you.”
The town, and the park, which draws more than two million tourists a year, were evacuated on Monday night, at a time when officials estimated there were 15,000 visitors in the park.
Deteriorating air quality forced firefighters and others lacking breathing equipment to evacuate to the town of Hinton, about 100 km (62 miles) away, park authorities said on Facebook on Wednesday evening.
Officials of Parks Canada earlier said they expected rain to arrive overnight.
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